Category: Stock market

Market Trends, Big Miners and Will the Music Stop?

Stock markets continue to rise. They seem to be ignoring the bad company results that are going to come out in the next few months. Although there are signs that the Covid-19 epidemic is weakening, some sectors such as hospitality are going to be in lock-down for some time. The economy is clearly going into recession with many employees being laid off. The lack of consumer spending, not just because some people have less money to spend, but because others are growing more nervous of spending money or finding fewer things to spend it on, is going to have a wide impact on the economy.

Cash is being put back into the stock market, simply because with very low interest rates there seem to be few good alternatives. The measures taken by central governments to refloat the economy will promote asset inflation so these trends may continue.

Investment trusts I hold which are popular with private investors seem to be some gainers from this market enthusiasm with their discounts narrowing again. Small cap stocks are also recovering and with very low liquidity just a few trades can raise their prices dramatically for no good reason. Or sharply reverse when a few sellers think the prices have risen too far. Rational judgement on share prices flies out the window when share prices are being driven primarily by momentum.

My portfolio continues to follow the market trend as it is very diversified even though I don’t hold shares in the sectors worse hit by the epidemic. I may have to put cash back into my ISAs which I withdrew only in March after making some sales. I have been buying a few large cap stocks which is not usual for me. I tend to avoid FTSE-100 companies as their share prices are driven by professional analysts’ comments, by geo-political concerns, by general economic trends and by commodity prices. You can buy a FTSE-100 company and soon find it’s going downhill because one influential analyst has decided its prospects are not as they previously thought.

But I did start buying a couple of big miners, BHP and Rio Tinto, in March which has worked out well. I considered the fundamentals sound and China, which is their major market, was clearly recovering and getting back to work rapidly. There was an interesting article in the Financial Times a couple of days ago highlighting other reasons why they are doing well. It was headlined “Australia’s iron ore miners exploit supply gap as Covid-19 hobbles rivals”. It explained how BHP, Rio Tinto and Fortescue Metals Group were capitalising on the production problems of their competitors in Brazil and South Africa who have been badly hit by the epidemic, while demand has remained buoyant. In Australia, where most of the mining is in Western Australia, they took vigorous action to halt the virus early on and most of the workers fly in and out so are easy to monitor. It seems that this unexpected turn of events has helped rather than hindered my investment performance for a change.

Although I am confident that the economy will recover in due course, and stock markets will follow that trend as they always must do, in the short term I find it difficult to be positive. It is hard to identify companies where one is both confident that they won’t be badly affected by the epidemic in the short term and where one can reasonably accurately forecast their future earnings. It’s the opposite of shooting fish in a barrel to use a bad metaphor. Together with the uncertainty of whether we will get a second virus wave, whether a working vaccine will be found, the impact of Brexit and the prospect of higher taxes, mine and the confidence of other investors must surely be low. In the short term, growth in company profits is going to be hard to come by, which is often the major driver for improving share prices.

But the market is ignoring that. It reminds me of the infamous saying of Citigroup CEO Chuck Prince during the last big financial crisis – “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.”

Unfortunately judging when to move in and out of markets is not a skill that most investors have and so I will stick to trend following while keeping a sharp eye on events.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Scottish Mortgage Investment Policy and LSE RNS Announcements

The Scottish Mortgage Investment Trust (SMT) have issued their Annual Report and AGM Notice. Readers who hold this trust will not need reminding that it has shown a remarkable performance over the last few months. That’s when the stock market has been decimated by the Covid-19 epidemic and the share prices of many other similar trusts and of the companies they hold have fallen sharply.

Last year SMT achieved a total share price return of 12.7% to the end of March and in the current year it achieved a share price increase of 23% to the 12th May. How has it achieved this return? Primarily by holding “hot” stocks like Tesla, Amazon.com, Illumina, Tencent and Alibaba to name the top five holdings. Over a third of the current holdings are unlisted ones. They claim the flexibility to invest in such companies “has been an important driver of returns over the last decade”. I do not dispute that but they are now proposing to change the “investment policy” of the company to raise the maximum amount that can be invested in such companies from 25% to 30%, based on the proportions when invested (that is why they have managed to already exceed that figure).

Is this a good idea? Should investors support it? Bearing in mind the travails of Neil Woodford where the funds he managed had large numbers of unlisted holdings, is it wise one has to ask?

Personally, I do not think it is and will be voting against. I am not suggesting that Baillie Gifford, nor the individual fund managers they employ, will make the same mistakes as Woodford. Just that valuing unlisted companies is a different matter to that of listed companies where there is always a market price. In addition unlisted holding are very illiquid in nature. Disposing of them can be very difficult. Private equity investment trusts often trade at a considerable discount to their net asset values for those reasons, while SMT currently trades at a premium of 2%.

Retaining the existing limit would prevent more unlisted investments being made, unless some of the unlisted holdings are disposed of, but that may be no bad thing given the current market enthusiasm for them.

I also note that Prof. John Kay is retiring from the board after serving since 2008. Much as I admire the wisdom of Prof Kay, I welcome this change. I hate to see directors of trusts serving more than 9 years and ignoring the UK Corporate Governance Code, as they so often do.

LSE RNS Announcements. I use the London Stock Exchanges free service to deliver RNS announcements via email. This morning it suddenly changed to a new format without prior notice. The first such notice I received was not in the best format in several ways. Wasted space in a right-hand margin, and no way to print just the announcement text and not the excess.

The second announcement I received just led me into an incomprehensible dialogue. I have sent them a couple of complaints.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Does Stock Trading Need New Rules?

There is a very good opinion piece in the Financial Times today from short-seller Marc Cohodes. It suggests that the fairness of capital markets is under threat in the new digital age and opens with this paragraph: “We live in an era where some stock promoters and short sellers open large positions prior to publishing market-moving information about a company, and rapidly close those positions after inducing a buying or selling frenzy”.

The author suggests that there should be a rule requiring a ten-day minimum holding period for any stock promoter or short seller who opens a large position and disseminates market moving information. That would give markets the time to evaluate the claims made while if the espoused views turn out to be true the publisher could still make profits. That seems an eminently sensible suggestion to me.

See https://www.ft.com/content/01b765c2-854e-11ea-b6e9-a94cffd1d9bf for the full article which is well worth reading.

What might be the objections to this proposal?

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Bad News Rises as Market Does Also

Stock markets continue to rise when the economic news is generally bad. Is the market rise based on relief that it does not look like all our shares our going to become worthless, or relief that we have not yet caught the coronavirus personally? Although I know a few people who have – thankfully all recovering.

But companies continue to issue announcements of the kind that say “too early to tell the full impact” while reporting negative sales trends in the short term. Meanwhile the Bank of England is going to simply print money to finance government spending rather than raising debt in the gilt markets. If that is not a negative sign, I do not know what is.

A couple of companies are worth mentioning: 1) Speedy Hire (SDY), a company who rent out tools and equipment and hence are a good bellwether for the construction and maintenance sectors. They report “reduced activity levels” but they have “retained a substantial proportion of its revenues”. They are cutting costs, it is uncertain whether it will pay a final dividend in August and it “suspends all guidance until the position stabilises”. That does not sound very positive does it?

2) Diageo (DGE) also gave a trading update today. They give very little in the way of specifics about actual sales. They are reducing costs and are still paying the interim dividend this month, but have stopped the share buy-back programme. More information would have been helpful.

Those investors who rely on dividend income are being hard hit as many companies are cutting them out so as to protect their balance sheets due to the uncertainty of the economic impacts of the epidemic. Some of the big insurers are the latest to stop paying dividends and this has a very negative impact on their share prices as institutional investors who run income funds dump them for other shares. Private investors are probably doing the same.

But the really bad news yesterday, although not totally unexpected, was from NMC Health (NMC) who announced they expected to go into administration. The likely outcome for ordinary shareholders is zero. In normal times this would have been a headline story but almost all news is now being swamped by coronavirus stories.

NMC was valued at £2 billion when the shares were suspended but were worth four times that in 2018. So this will be one of the biggest stock market wipe outs in history, probably arising from some kind of financial fraud. I hope those responsible do not escape justice.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Stock Market Bottom and IC Share Tips?

This morning (6/4/2020) the stock market bounced upwards on faint indications that the virus epidemic might be slowing. Have we reached the bottom yet? I am not so sure. A lot of companies in the worst hit sectors are closed for business and running out of cash. They are likely to remain closed for a long and unpredictable time.

We have also not yet seen in financial results news the impact of the virus on the general economy, other than the sectors more specifically hit. But with so many people now out of work there will be a significant impact in due course on companies higher up the supply chain, i.e. the businesses that actually produce goods and distribute them.

I certainly won’t be buying many shares until a clear upward trend is apparent and where the financial results of a company are clearer.

There were a couple of companies which were tipped in this week’s Investors Chronicle as “BUYS” which are worth commenting upon. Diageo (DGE) the drinks company was one. I don’t currently hold it but did so until a few months back. The current share price is now significantly lower.

It’s interesting to look back at the forecast p/e and yield when I purchased an initial holding in November 2018. I always keep a sheet, printed out from Stockopedia, when I first take a stake so that I can look back at my good or bad decisions. The p/e was 22 and the dividend yield was 2.4%.  It’s now on a forecast p/e of 20 and a yield of 2.8%. It’s not really become much cheaper.

Analyst’s profit forecasts have come down but not by much. The company did give a Trading Update on the 26th February. It said this: “Public health measures across impacted countries in Asia Pacific, principally in China, have resulted in: restrictions on public gatherings, the postponement of events and the closure of many hospitality and retail outlets”. It hardly mentioned the impact on the rest of the world probably because on that date the epidemic was mainly concentrated in China.

We really do need more information on the sales status in Europe, the USA and South America to have any idea on the likely impact on profits for the current year. The Investors Chronicle gives positive comments about the company’s “brand power” and “global reach” but I will be restraining myself from jumping into another holding before the picture is a lot clearer. The same applies to many other companies.

Another share that IC tipped was Polar Capital Technology Trust (PCT) which I currently hold. The article included some interesting comments from fund manager Ben Rogoff. He said “We are focused on maintaining a portfolio of high-quality growth companies with secular tailwinds, and have a strong bias to those with clean balance sheets in areas we believe will be less impacted by an economic downturn and are likely to emerge stronger once this challenging period has passed. Companies with high levels of recurring revenue and strong balance sheets should be able to withstand a couple of very challenging quarters”.

He also said “We have rotated away from most cyclical areas, including travel, payments, small business and advertising, industrial/auto and associated robotics, and semiconductor stocks”.

These seem eminently sensible comments. The company’s share price has recovered from a dip in mid-March when both private investors and institutions were dumping stocks regardless and moving into cash. But after the share price bounce this morning, PCT shares appear to be at a premium to the Net Asset Value. In other words, it’s not cheap either. So another share not to rush into buying I suggest until it becomes clearer what the impact on the companies it holds in the portfolio will be. If there is a general economic recession in major countries there will be nowhere to hide.

DGE and PCT may both be quality operations but they are not great bargains I suggest at present. The only companies whose share prices have fallen a long way are those where their businesses are either closed or may be suffering in a big way. Until we have a clearer picture of the impact on the general economy, these are not ones to buy either I suggest.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Bad News for the Housing Market and On-Line Retailers

The news in the housing sector is all bad. Banks have stopped providing mortgages and builders have stopped building houses (Redrow announced it was closing all its sites this morning). Estate agents are also giving up as nobody wants to have strangers wandering around their house and there are few new buyers. Who would look to buy a house given the economic uncertainty and with everyone’s jobs under threat? Rightmove previously announced it was discounting all its bills to agents but they have now announced that the proposed final share dividend is being cancelled.

Did you think on-line retailers might be able to continue operating? Think again. Next has announced it is temporarily closing its on-line operations including warehousing and distribution. Apparently “colleagues” feel they need to be at home. This mirrors what I have seen from a couple of smaller on-line clothing suppliers I use. They both announced closure in the last few days. Will Boohoo, ASOS and Amazon be able to continue to operate? Only supermarkets seem reasonably sure to be able to stay in business over the next few weeks.

This gloom over the country’s business status was echoed in the comments of Paul Scott on Stockopedia. He said this morning: “Hundreds of £billions in economic activity is being killed off, with ruinously expensive compensation schemes being dreamed up. For what benefit? We’re likely to end up with millions of unemployed, many thousands of destroyed businesses, all of which might have slowed down the spread of the virus a little”. He has lost confidence in the recent stock market bounce and thinks losses will be ruinously high in many companies. I agree with his comments. Certainly in many sectors it’s a question of which companies will survive the year, not whether they will make any profits or pay any dividends.

The only positive glimmer is that Anthony Bolton, who ran Fidelity’s Special Situations fund until 2007 very successfully, is apparently moving back into the market to purchase selected stocks according to an article in the Financial Times. He says “at these prices there are really interesting opportunities”. Certainly the key is to be very selective even if you believe the crisis will be over by the end of the year.

Meanwhile I am sat in the bomb shelter otherwise known as isolating at home. These are such momentous times that I decided to start writing a diary just as my father did during the second world war. It may interest my offspring in due course as reading my father’s diary did after it came to light 37 years after he died. My diary may be a much shorter one though if I catch the virus.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Recent Annual Reports and Trust Discounts

After the news over the weekend, it’s clearly going to be another very bad day on stock markets. One rare riser initially was Ten Entertainment Group (TEG) despite the fact that they announced this morning that all their bowling venues had been closed but they made some positive comments about their cash balances and Government support which might have helped.

As per guidance issued by the Financial Conduct Authority (FCA) it has delayed publication of its Preliminary Financial Results for two weeks as many other companies will be doing. This seems unfortunate to me as a company could just give only a limited outlook statement in there and issue separate trading statements as the crisis developments. But there is no reason to delay the historic figures for the last year.

The AIM Regulator (the LSE) has also announced that in response to the epidemic it is making the rules around suspension of listings more flexible. It is also permitting Nomads not to do site visits to new clients. See https://www.londonstockexchange.com/companies-and-advisors/aim/advisers/inside-aim-newsletter/inside-aim-coronavirus.pdf for details.

Clearly all companies affected by the closure of all public entertainment venues such as pubs, bowling alleys and cinemas are going to suffer greatly. Although they might get some financial relief from the Government, a close examination of their balance sheets and debt will be essential. Some might request suspension of their shares until their financial position becomes clearer. Property companies seem to have been badly hit simply because independent valuers are having difficulty valuing commercial properties as the market is frozen. Retailers with physical stores are also closing them, apart from supermarkets who are doing well due to panic buying and the shift from eating out to eating in as restaurants close. But they seem to be having difficulties adapting their supply chains and coping with the new demands for on-line ordering.

With preliminary announcements being delayed, the AGM season might be delayed also. Companies might have difficulty holding physical meetings and venues might become unavailable, particularly in London. We might see companies holding small meetings in their own offices instead as they won’t expect many people to turn up – I certainly won’t be attending as I am one of those people being told to stay at home for 12 weeks. Some larger companies may try and provide a live on-line stream of the meeting such as Alliance Trust (ATST) who just issued their Annual Report which I would certainly encourage them to do, preferably with some way to submit questions.

It is interesting to look at the discounts to NAV of the share price of that trust and other similar large trusts. According to the AIC, their discount was 17.5% at the weekend, and others were Brunner on 17.5%, F&C on 19.3%, Monks on 12.6% and Witan on 15.6%. These are much higher discounts than such trusts have traded on of late. When private investors have lost faith in the stock market, the discounts tend to rise, although some of the discount can be accounted for by the delay in reporting.  There may be some bargains in investment trusts in due course as private investor sentiment tends to lag financial news.

One company that just distributed their Annual Report and which I hold is property company Segro (SGRO). They had a good year last year although the share price is down 28% from its peak in February due to the general malaise in the property sector as open-end funds close to redemptions and run out of cash. I won’t  be attending their AGM but I will certainly be submitting a proxy vote which all shareholders should do anyway. I will be voting against their remuneration report simply because the total pay of executive directors is too high. The remuneration report consists of 27 pages of justification and explanation, which is way too long and is a good example of how both pay and pay reporting has got out of hand of late.

With bonuses, LTIPs and pension benefits, the total pay of the 4 executive directors (“single figure” report) was £20.4 million. They also wish to change the Articles of the company to raise the limit on the total pay of non-executive directors to £1 million so I will be voting against that also. I would encourage shareholders to do the same.

Lastly for a bit of light relief as it looks like we might have a major recession this year, I mentioned the book “Caught Short!” by comedian Eddie Cantor on the 1929 Wall Street crash in a previous blog post. Now Private Eye have repeated one of his comments in October 1929 after John D. Rockefeller (probably the richest person in the world at the time) said “during the past week, my son and I have for some days been purchasing sound common stocks”. This was seen as an attempt to calm the market in a world where a few very wealthy investors could influence financial markets. Eddie Cantor’s response was “Sure, who else has any money left”. I hope readers do not feel the same.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Stock Market Turmoil – Don’t Sit There Awaiting a Rebound

The virus epidemic is causing major disruption to businesses and our personal lives. Thank god that we have the internet so we can conduct business and do our shopping without leaving home. But the UK is seen as one of the victims in the world so the pound is falling to parity with the dollar for the first time for many, many years. Meanwhile the Governor of the Bank of England is saying that he will print as much money as needed – unlimited “helicopter” money to lend to businesses to keep them afloat. Will that stop a recession? I doubt it. But to look on the bright side, it may be a short one.

China seems to have stopped the virus from spreading with no new domestic cases and movement restrictions being lifted. There are also some technical developments that might assist particularly in testing for the virus. But the UK is gearing up for a major epidemic and major stress on the NHS.

I am in isolation trying to avoid catching the disease as I certainly don’t wish to have another spell in intensive care as I had a few years ago. I ended up with “intensive care neuropathy” where all your nerves weaken. Had to learn to walk again, rather like Kenneth More playing Douglas Bader in Reach for the Sky. I recovered but it can be a very dangerous syndrome.

The news from my stock market portfolio is mixed based on the latest announcements which every company is now issuing. LoopUp (LOOP) who provide tele-conferencing is up over 40% today after a very long decline, and there are few other rises today, but overall my portfolio is still slightly down. It was not helped by 4Imprint (FOUR) reporting today that sales have declined by 40% over the last 3 days as against the prior year. They sell promotional merchandise and this an example surely of companies cutting back on non-essential marketing spend and events.

The commercial property market is interesting in that yet again a number of open-funded property funds have suspended redemptions. It is interesting to look back at the share price of TR Property Investment Trust (TRY) which I have held for many years. Such trusts have been badly affected by the gloom in the property sector even if the property companies they invest in may hold long leases and not much exposure to retail or other virus sensitive areas. But the share price of TRY is now back to the level it was in 2013. That’s down over 50% from its peak in February. If the recession is short, that will surely be seen as an anomaly.

It’s also worth remembering that valuing companies on short-term results or trading statements gives you a very poor estimate of what a company is really worth. What matters is the discounted future profits over many years. One bad year has relatively little impact. But when investors are panicking and simply reducing their exposure to the market by moving into cash, then valuations can become both unrealistic and extreme.

The Government’s response is probably a sound one. They are betting that the recession will be short and that keeping companies afloat by short-term loans is better than letting them go bust which would create a snowball effect on suppliers and staff employment.

But some sectors are clearly going to be dire in the short-term. Hospitality is one. Accesso (ACSO) who provide technology to visitor attractions published results yesterday. They might benefit from a low pound but their sales relate directly to visitor numbers to their customers’ sites. I cannot imagine US theme parks being very busy this year and solving queuing problems might be seen as irrelevant. They also declared a write off of $53.6 million on past capitalised software costs. With a new CEO this was hardly surprising to me given the shape of the business and the failure to find a buyer for it recently. Investors will need to be in for the long-haul if they wish to stay on board, but many clearly do not given the share price performance of late. The risk is that some buyer will come along and pick up the useful technology and customer contracts at a bargain price.

One aspect of the virus epidemic I am particularly unhappy with is that the market turmoil and declines have generated a lot more work on my portfolio than usual. Unlike some people, I do not simply sit there expecting shares to bounce back up in due course. Some may but others will not. Some companies may go bust or become a shadow of their former selves while other new opportunities arise. The trend to internet shopping and services will be accelerated. For example one of my eighty-year old neighbours has just opened a supermarket web shopping account for the first time. Ocado (OCDO) has had difficulty keeping up with demand and even had to close their App service temporarily. But once people get into the habit of shopping on-line they won’t revert to old ways. The future for the High Street looks ever bleaker.

There is one other aspect to consider. Will a short, sharp recession be quickly forgotten about or will it prompt the definite end of the bull market? Will share investment go out of fashion after many investors realise they have lost a pile of money from this incident? The general economy may quickly recover but the stock market might not. I don’t know the answer to that question but as always I won’t be guessing at it – just following the trend.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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The Great Crash – Lessons from History

The stock market is falling and it may continue to do so, with the odd bounce along the way. The reason is partly because when confidence is destroyed that investing in shares is bound to make you money, which has been a rule for the last ten years, then it takes a real change of heart to move the market in the opposite direction. Confidence, or lack of it, is contagious just like the coronavirus which has probably contributed to the market collapse. The classic example of a market crash is still the 1929 collapse on Wall Street. That was so extreme that it wiped many people out and prompted a number of suicides. It was not until 1932 that the market stabilised and many years after that until it recovered to its previous levels. Or for 2020’s speculators in the words of Al Jolson: “You ain’t seen nothing yet”.

The 1929 crash was created by cheap money where everyone was buying on margin and there were pyramid schemes of trusts that invested in other trusts. Even shoe shine boys were giving share tips and people were drawn into the stock market who had no financial experience at all. When the markets started to fall, margin calls were invoked which drove the market down further. Banks that had lent money for punters to invest in the market went bankrupt when the margin calls were not paid. One result was economic collapse and a fierce depression in the USA which echoed around the world in the 1930s. The real world of business activity mirrored the stock market which is not always the case. That was partly due to poor Government responses.

One very amusing slim volume on the Wall Street crash is a book entitled “Caught short!” written in 1929 after the initial crash by Eddie Cantor. He describes himself in the book as a comedian, author and victim. It’s recommended to those who need some light relief from the recent debacle.

Cantor was both “in the market, and under it” as he says. After one of the worst market days he was too frightened to go home so he checked into one of New York’s largest hotels and asked for a room on the nineteenth floor. The desk clerk asked him if it was for “sleeping or jumping”.

This time around the Bank of England has reacted to the collapse of the market and concerns over the economy from the virus impact so that after a long period of very cheap money it is making it even cheaper. We are again at the lowest bank base rate in history in the UK and other countries are also doing things to boost their economies which may transfer into their stock markets.

But will that revive confidence in the stock market? Only for a short time I suspect because shares, particularly US ones, still do not look particularly cheap. And bear in mind that most markets including the UK’s are highly correlated with the USA’s.

How the actions of Governments will work out remains to be seen, but hopefully they have learned something from previous market crashes. The only difference from 1929 is that the speed of trading in the market and the volumes of trades have increased exponentially. We also have many more index-tracking funds which promote herding behaviour. These two factors might not help.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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It’s Not the End of the World, But It Is a Bear Market

After the Chancellor’s statement yesterday in which he did a good job of scaring everyone about the economic impact of the coronavirus epidemic, and news coverage of the spread of the virus overnight, the UK stock market was in freefall this morning. That was not helped by sharp falls in the US and Far East markets overnight.

A bear market is when folks dump shares irrespective of a company’s prospects or earnings and is driven by herd following in index funds and others. When does a bear market end?  After many months and when shares start to look very, very cheap on fundamental ratios such as earnings or dividend yields. That is clearly some way off yet.

To have that happen the public do also need to have confidence that the virus epidemic is over and that only a few old folks like me have died or are likely to die as a result. That is at least a few weeks away. But the market recovery may start to take place as soon as there is the first sign that the world is not going to end after all, which it will certainly not.

Moving into cash is one possible short-term reaction but the Bank of England have undermined that strategy by reducing interest rates to record lows. AJ Bell Youinvest have just announced that they will not be paying interest on cash in clients’ accounts any more. Other brokers (not many anyway) and banks will no doubt follow to cut their interest rates on deposits. But if there is an economic recession then holding cash, or simply spending it, is not a bad idea until the economy revives. Now is the time to cash in your shares and buy a new car or a house extension! Or for the altruists, now is the time to donate money to charity, particularly as the tax-year end is coming up.

Meanwhile the national media seem to have decided the Chancellor’s budget is an inflationary one of the spend-spend-spend variety. Why should the Government not borrow money for some required investment in infrastructure when it can borrow money at such low interest rates?

But how much influence do the Chancellor or the Governor of the Bank of England have over the real-world economy? Not a lot in essence when it is mainly driven by external factors and public sentiment.

While this plays out, I will not be dumping shares indiscriminately but I will be exiting those companies that may be particularly badly hit by the virus, if I have not already. That includes travel and holiday companies, airlines, entertainment venues, pubs and hotels, high street retail operations where footfall will decline, etc. But I may buy those companies where the share price has fallen because of the general rout when their income is not obviously threatened – for example because they have long-term contracts or guaranteed repeat business.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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